International Higher Education, Winter 2003

Cost Sharing and Higher Education Access in Southern and Eastern Africa

Bruce Johnstone and Pamela Marcucci
D. Bruce Johnstone is University Professor of Higher and Comparative Education at the State University of New York at Buffalo, and director of the Center for Comparative and Global Studies in Education. Pamela Marcucci is project manager for the Center's International Comparative Higher Education Finance and Accessibility Project. Address: Comparative and Global Education Center, Baldy Hall, SUNY-Buffalo, Buffalo, NY 14260, USA. E-mail: <DBJ@buffalo.edu>.

A 10-nation conference, "Financing Higher Education in Eastern and Southern Africa: Diversifying Revenue and Expanding Accessibility," was held in Dar es Salaam, Tanzania, in March 2002, cohosted by the University of Dar es Salaam and the International Comparative Higher Education Finance and Accessibility Project of the State University of New York at Buffalo. The conference was funded by the Ford Foundation. The full report of the conference is available on the website of the University at Buffalo Project at: <http://www.gse.buffalo.edu/org/IntHigherEdFinance> The following article is based on this conference.

The policy of cost sharing in higher education distributes the burden of funding among governments (or taxpayers), parents, students, and donors. Businesses may be viewed as an additional party to cost sharing, but because business's share is generally just passed on to consumers in the form of higher prices, the incidence, or ultimate burden, of a so-called business share becomes rather hard to distinguish from a general sales tax--or even from the inflationary incidence of deficit spending. Most, but not all, of the world is moving in the direction of greater cost sharing, in the form of an increase in the shares borne by parents and/or students and a relative reduction in the shares borne by government (or by taxpayers and consumers). Moving toward greater cost sharing can take the form of introducing tuition or increasing existing tuition rates, imposing more nearly “break-even” charges for student dining and lodging, reducing non-means-tested student stipends (and improving repayment collection on student loans), and encouraging a tuition-dependent private sector.

The Necessity of Cost Sharing
Participants at the Dar es Salaam conference generally agreed that cost sharing in some form is imperative for African higher education. The handful of African universities--including the University of Dar es Salaam and Uganda’s Makerere University--that have introduced cost sharing measures seem to be recovering from the catastrophic defunding of higher education in most of Sub-Saharan Africa.

Tuition fees may be considered equitable when higher education is partaken of by a minority--and disproportionately by the children of more affluent parents. An even more compelling--and less ideologically contestable, rationale for tuition fees was identified as the sheer need for revenue, stemming from the enormous and rapidly increasing demand (and need) for higher education and from the likely inability of the taxpayers to meet the expanding revenue needs. This is so not only because of the difficulty of taxation, but even more because of competing public demands on the same scarce public revenue.

Conferees stressed that the principal source of higher education funding must continue to be the government, or taxpayers, and that cost sharing must be seen as a way to supplement this revenue. The principal beneficiaries of cost sharing must be future students (and therefore the society), rather than the universities, university leaders, or university faculty. Likewise, university budgets must be transparent and generally perceived to be "appropriate" for the introduction of costsharing to be politically acceptable. Stakeholders--especially students and their families--need to see that the university has cut costs, become as efficient as possible, and has taken steps to “distribute the pain” of the inevitable shortfall in revenues. Opposition to cost sharing is most vocal in a climate of underlying mistrust of government and university leadership.

Means Testing
Cost sharing is also more acceptable in the presence of programs for means-tested grants and student loans. Means testing is difficult in the absence of verifiable measures of family income and family assets--a situation that characterizes nearly all of sub-Saharan Africa. Therefore, estimates of "family financial means" and "family financial need" will probably have to be used--with sufficient auditing and penalties for misreporting, to yield acceptable levels of compliance. Such estimates might include the parents' occupations and education levels and whether the family owns a car or is entitled through a job to a car and driver, has running water, is from a remote region, or belongs to a linguistic, ethnic, or other historically disadvantaged population. Countries are presently experimenting with such measures. Communicating experiences will help policymakers arrive at and share fair and cost-effective methods of judging "family financial need."

In any move toward greater cost sharing, special attention must be shown to the family's willingness to support the higher education expenses of daughters as well as sons. More study is needed on the extent and nature of the problem, and care should be taken not to encourage or sanctify a tradition of lesser support for daughters. However, some compensation may be called for in the form of a higher means-tested grant for daughters than for sons.

Problems of Student Loan Programs
While acknowledging the poor record of student loan programs around the world, including many failed or poorly performing programs in Africa, such programs (or graduate taxes and other ways of deferring student financial contributions) are essential for a program of cost sharing that includes students. Student loan programs can advance the general aim of cost sharing (as opposed to the aim merely of getting money to students with little concern for its recovery). To do so--that is, to shift a portion of higher education costs to students--the loan programs must provide for cost recovery, measured in the discounted present value of the stream of repayments, in an amount nearly equal to (or at least not a great deal less than) the sum loaned or advanced to the student in the first place.

Most "failed" student loan programs throughout the world, as well as in Africa have failed because of insufficient capital (i.e., lack of savings) to make loans at reasonable rates of interest, insufficient policies and procedures for servicing and collecting the loans (and thus high administrative expenses and default rates), excessive built-in subsidies (generally through overly low rates of interest charged to borrowers). These problems seem mainly solvable, and the conference participants thus looked forward to more success with future student loan programs in the African context.

As elsewhere, there is interest in Africa in the concept of income contingent loans (or their variant, so-called "graduate taxes"), in which the repayment obligation is expressed as a percentage of future earnings rather than as a schedule of fixed repayments (e.g., as in the Australian Higher Education Contribution Scheme). However, income contingent loans require a means of verifying all (or at least most of) borrowers' incomes for their working lifetimes. Such loan schemes can work in a society and an economy where most borrowers work predominantly at one job at a time, in the formal economy, and where their earning will be known to and monitored by the government along with their income tax and pension contribution obligations. In societies and economies where many of the borrowers will derive much of their income from the informal economy, or "on the side" from second and third jobs, or will likely leave the country where the loan was originated for much or all of their earning lifetimes--which is the case in most sub-Saharan African countries--full incomes will be hard to verify and may not be legally capturable. In such cases, income contingent loans will probably not work.

According to the students who spoke at the conference, the essence of a student loan program is sufficiency--that is, providing enough money to support the costs of living and any tuition fees. The next most important features, in order, were a sufficiently long repayment period to keep monthly (or annual) repayments "manageably low," a low rate of interest, and the absence of a need for a co-signatory.